18 June 2018
Part of UNEP FI’s work in ecosystems management includes creating investable models for investors, as well as providing knowledge, and imparting insight for private finance to contribute to sustainable land use projects. Côte d’Ivoire has the fastest rate of deforestation in the world, much of which is caused by the cultivation of cocoa, a commodity that is a big contributor to the economy. Thomas Yapo, UNEP FI’s Economics and Finance Consultant for Africa writes about a project designing tangible financing models for deforestation-free cocoa agriculture which will help slow deforestation in Côte d’Ivoire, and promote financial inclusion for local cocoa farmers.
Côte d’Ivoire used to be known for its biodiversity and large forest cover. The ‘Ivoire’ in its name alludes to what was once an abundant population of elephants, who are now en route to disappearance. Accounting for 15 percent of GDP and 40 percent of export revenues, cocoa brings prosperity to Côte d’Ivoire. However, this commodity is degrading the country’s natural wealth, and Côte d’Ivoire has failed to protect its national emblem: elephants.
In 1960 – the year of its independence from France – Côte d’Ivoire had 16 million hectares of forest, in other words this forested land occupied one half of the country’s land surface. Currently, this number is at 2.5 million hectares or nearly 8 percent, according to FAO. This means that the country has lost nearly 85 percent of its forested land since independence. This landscape change is causing major alterations in local climatic conditions, with rainfall dropping by 14 percent in the last 50 years.
If this trend continues, the climatic conditions conducive to the culture of cocoa – Côte d’Ivoire’s main agricultural commodity and foreign exchange earner – could soon disappear. Decades of cocoa grown under the sun produced better yields, but it has also exhausted the soil. The decreasing fertility of unsustainably operated plantations is causing farmers to encroach on forests in search of more productive land. Therefore, it appears that the cocoa sector – a potential casualty of climate change – is also the main driver of deforestation in Côte d’Ivoire.
Côte d’Ivoire not only has the fastest rate of deforestation in Africa, but also in the entire world. Therefore, it is vital that Côte d’Ivoire saves its remaining forests. The issue is so serious that President Alassane Ouattara signed the UN New York Declaration on Forests in 2014 and committed to restore the national forest extent to 20 percent of the territory by 2030.
Within this context, the most promising solutions to decouple agriculture from deforestation would be to increase agricultural productivity with improved plant material, while making use of good practices (intensification) and planting the appropriate trees in cocoa plantations (agroforestry).
In 2016, the Permanent REDD+ Executive Secretariat at the Ministry of Environment mandated a framing study on the private investment opportunities in Côte d’Ivoire. The main goal of this study on economic and financing models was to provide the government with useful information to assist ongoing private sector commitments, and to bring strategic data to other related initiatives. These initiatives included the Cocoa and Forests Initiative, the working group Environment and Climate Change from the cocoa sector Private-Public Partnership Platform or the Green Climate Fund.
In cooperation with the Ivorian State and its partners, UN Environment is partnering with the European Forest Institute to design tangible financing models of deforestation-free cocoa agriculture for the private sector. The successful uptake of agroforestry in the cocoa production chain is a major component of the analysis.
In the first phase, several field missions were carried out to collect data together with private sector companies and other relevant stakeholders, while performing extensive academic research. Thereafter, an Excel model was created as a decision support tool to assess the profitability of three pilot projects initiated by large chocolate manufacturers.
Photo: UN Environment/Brice Delagneau
The transition from business-as-usual towards agroforestry should eventually diversify revenue streams and reduce monoculture risks for smallholder farmers. Importantly, the study outlines a potential shortfall in revenue for farmers in the short-to-medium terms that needs to be offset. For agroforestry to be implemented in Côte d’Ivoire, smallholder farmers are pivotal. While addressing land security issues, it is crucial to improve the access of smallholder farmers to finance, which would break the vicious circle of poverty and promote financial inclusion.
Now in the second phase of this project, the aim is to identify the financial conditions for scaling-up these agroforestry pilot projects at the national level. As local banks perceive lending to smallholder farmers with no collateral as too risky, action is being taken to formulate innovative financing solutions. This would involve using funds of varying degrees of risk profile, to bring the financial sector on board and promote smallholder access to finance. The current focus is to catalyse constructive dialogue by creating a platform for all stakeholders (chocolate manufacturers, logging companies, government ministries, the Coffee-Cocoa Council, NGOs, insurers and investors). This platform is expected to establish a national definition of agroforestry inside cocoa plantations, while building consensus on new financial schemes that could work in the Ivorian context.
Agroforestry, though not the only solution to halt deforestation, is potentially one of the most effective. Hopefully, these initiatives will generate innovative financial schemes and new public-private partnership models to produce forest-friendly cocoa in the future.
This post is based on an article with the same title which can be accessed here.
About the writer
Thomas Yapo graduated in Econometrics and Management. He is an Economics and Finance Consultant for Africa, working on sustainable land use finance at the United Nations Environment Programme Finance Initiative (UNEP FI)
Top photo: UN Environment/Brice Delagneau